Microsoft, Yahoo Acquisition Rumors Swirl

Microsoft could be in talks to acquire Yahoo, according to Reuters. Microsoft has no plans to acquire Yahoo, counters Bloomberg. Who's right?

Microsoft has
no plans to acquire Yahoo, according to a new Bloomberg report.
Bloomberg drew
its news from "two people familiar with the matter," who refuted an earlier
report from Reuters that the software giant was seriously
considering a bid for the Web-portal company.

That Reuters
report suggested that Yahoo's market value stands at $18 billion, making it a
significantly cheaper target than three years ago, when Microsoft tried to
snatch it up for $44.6 billion. Reuters quoted "sources close to the situation"
for its information.

Other
potential buyers are apparently circling a weakened Yahoo, which has lost
ground on numerous fronts to competitors such as Google. In a bid for stronger
market position, Yahoo previously entered into an agreement with Microsoft to
have the latter take over its back-end search apparatus, in theory freeing up
resources to develop more and better user-end content. That deal worked out
well for Microsoft, as it effectively doubled Bing's search-engine market share.
When that deal
was announced in the summer of 2009, Microsoft CEO Steve Ballmer told reporters
and analysts: "This deal is not better than the last deal; it is different than
that last deal." The drawbacks to a Yahoo-Microsoft search-engine deal, he
added, included a "higher tax rate and less money up-front."
Microsoft has
recently shown it's more than willing to snatch up a property for an
eye-popping price. This summer, the company agreed to pay $8.5 billion for
Skype, which will become a new business division. Skype in its new form will
support Microsoft products, including Windows Phone and Xbox Kinect, in
addition to integrating its services across the breadth of Microsoft's
extensive software portfolio.
In addition,
Microsoft has entered into aggressive partnerships with companies like Facebook
and Nokia. A number of the former's features, including the "Like" button, now
feed social data into Bing. Nokia recently agreed to drop its homegrown mobile
operating systems in favor of Windows Phone, a deal that should yield new high-end
smartphones by the end of 2011.
Whether that
aggression will lead Microsoft into taking another run at a cheaper Yahoo,
though, is evidently up for debate. Certainly, it would add to Microsoft's
growing lineup of cloud products and services; moreover, Yahoo's millions of
users represent a treasure trove of data that Redmond can leverage to refine
its products.
But with so
many deals already in progress, Microsoft might lack the appetite for digesting
yet another giant company.
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Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.